COVID Tax Tip 2021-57, April 27, 2021
The IRS urges low- and moderate-income individuals and families, especially those who don’t normally file a tax return because they are not required to by law, to use IRS Free File. Filing a tax return is the only way for taxpayers to claim a refund or claim benefits like the recovery rebate credit and Earned Income Tax Credit. Taxpayers who are not required to file should still consider doing so to get money they are due.
IRS Free File allows people to prepare their own federal tax return online, e-file and get a refund. All individuals have until May 17 to file a 2020 federal tax return or request an extension to Oct 15 to file their return, which can also be done using Free File.
Free File offers free access to brand-name tax software to anyone who makes $72,000 or less. There are nine Free File products in English and one in Spanish. In addition, MilTax, is available free through the Department of Defense. It offers a similar online tax preparation service to members of the military.
The Free File program provides low-and moderate-income families, individuals like students who are now on their own, people who are homeless and others a fast and easy way to claim valuable tax benefits. All anyone needs to use the software is access to a computer or a smartphone.
IRS Free File is a free way to claim the full amount of tax benefits, including the 2020 recovery rebate credit, and ensure that eligible people get their refund. People can visit IRS.gov for details about claiming the 2020 recovery rebate credit if they aren’t required to file a tax return. They should look for a Free File product with “no minimum income,” file electronically, and choose direct deposit to get their money quickly.
Free File is also a great way to get other tax benefits like the earned income tax credit and the additional child tax credit. Low- and moderate-income individuals and working families who don’t normally file a return should consider filing to claim these credits. Historically, many of these families miss out on the earned income tax credit and additional child tax credit because they don’t file. Under a special COVID-related rule, people who had reduced income or were laid off during part or all of 2020 often still qualify for these benefits. If they worked during 2019, they could choose to use their 2019 earned income to figure these credits if it was higher than their 2020 earned income. Some people will also be able to get advance payments of the child tax credit later this year. Those who qualify for advance payments just need to file a 2020 tax return.
Everyone should consider using Free File, especially those who didn’t get the full first and second Economic Impact Payments and may be eligible to claim the 2020 recovery rebate credit when they file. This includes:
People experiencing homelessness. If they are not someone’s dependent, they likely still qualify for the recovery rebate credit even if they have little or no income. They can still use Free File even if their only access to the Internet is through a smartphone. Look for a Free File product with “no minimum income.”
Individuals who were claimed as a dependent on someone else’s tax return in 2018 or 2019, but who cannot be claimed as a dependent in 2020, may be eligible for stimulus payments and must file a 2020 tax return to claim a recovery rebate credit.
Couples with one spouse who has an ITIN. Under a new law, a married couple filing a joint return may be eligible for a partial credit when only one spouse has a Social Security number valid for employment. If a couple didn’t receive one or both Economic Impact Payments for this reason, they may be eligible to claim a 2020 recovery rebate credit and must file a 2020 tax return. There is an exception if one spouse is a member of the U.S. Armed Forces.
Parents with a new qualifying child. Some families who had a baby or adopted a child during 2020 didn’t receive a first or second Economic Impact Payment for that qualifying child. They may be eligible to claim a 2020 recovery rebate credit and must file a 2020 tax return.